Tuesday 10 February 2015 - Veebs Sabharwal

Foreign investment in Egypt by multinational consumer goods firms is continuing to show strong momentum following cereal producer Kellogg’s acquisition of a majority stake in Cairo-based Bisco Misr, a leading packaged biscuits company in Egypt.

As the largest biscuit manufacturer in Egypt, with a market share of 22%, Bisco Misr proved a popular and highly prized acquisition target. Following competing bids from Abraaj Investment Management, an affiliate of United Arab Emirates-based Abraaj Capital, interest from Saudi Arabian Savola, Kellogg’s acquired 86%of Bisco Misr on January 15 for EGP 89.86 (£81m) per share.

Bisco Misr, named among the Top 500 Companies in the Middle East by Forbes Magazine, has maintained a strong presence in Egypt for over fifty years and today it produces some of the country’s most recognisable brands, including popular biscuits Bisco Luxe, Chico Chico and Bisco Wafers. The firm is publicly traded, has 3,300 employees and three manufacturing facilities and saw annual sales of approximately $46m in 2013.

“Bisco Misr is an excellent strategic fit for Kellogg, and Egypt is a growing market with a strong economy,” said John Bryant, Chairman and CEO, Kellogg Company. “A number of Kellogg’s cereals and snacks are already offered in the market and the combination of the powerful Bisco Misr brands with Kellogg’s iconic brands provides a tremendous opportunity for growth.”

In mid 1998, the Egyptian government floated 60% of the company on the Cairo and Alexandria Stock Exchange, changing the company’s status from a public sector company to a private enterprise. In January 2005, a consortium led by Concord International Investments Group acquired 56.2% of Bisco Misr, taking effective control of the company later that year. Since 2005, Concord invested over EGP 270m in production upgrades, new production lines, overhauling and renovation, IT systems, distribution fleet and operational and management restructuring.

“The enhancements we realised at Bisco Misr were successful in growing the company’s domestic market, but we also saw enormous potential to increase exports to expand the company internationally,” said Concord Chairman Mohamed Younes. “With the new government and improvements to Egyptian quality of life, Kellogg’s is well positioned to help this great Egyptian company grow at home and abroad.”

Kellogg’s acquisition of one of Egypt’s most recognised baked goods companies will enable the global food company to expand its global snacks business in key emerging markets, including Egypt. Bisco Misr’s strong manufacturing capabilities, skilled labour and infrastructure, coupled with Kellogg’s technology, brands and marketing expertise, will benefit both companies in Egypt and other North African countries.

“Kellogg’s acquisition of Bisco Misr is a strong vote of confidence in Egypt’s consumer market and the role Egyptian companies can play in helping multinational firms reach emerging markets with quality products,” said Minister of Investment, Ashraf Salman. “We are encouraged to see the positive impact the reforms we have started to implement, the inauguration of major projects and the resolution of long standing disputes and issues are starting to have on investment in the Egyptian economy”, the Minister added.

Consumer demand in Egypt has rebounded over the course of 2014 and the beginning of 2015 with a myriad of local and foreign companies expanding operations in the last year. Food is seen as a fast-growing sector in Egypt, the most populous Arab nation with 90m people.

Under the administration of President Sisi, significant inroads have been made in restoring political stability and tough decisions are being taken to reshape the economy. There are now clear signals that stability is returning and that the economy is turning the corner. This momentum has already been recognised by the IMF and international ratings agencies. The focus now is to accelerate this growth, to unlock the country’s true potential, and the talent of the Egyptian people, ensuring that all segments of society benefit from this higher growth.

The political stability, economic reforms and an economic turnaround have attracted investor interest from Europe, Asia and the U.S. Kellogg’s is the latest in line of large multinational consumer goods firms to announce significant investments in Egypt, reflecting the growing interest in Egypt’s consumer sector and economy as a whole.

These investments come at a very important time for Egypt, as the country seeks to increase foreign investment and aims for economic growth of at least 4% in 2015 and at least 7% for the next decade.